How to Pay Down a Mortgage or Save for a Dream Home

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The days of zero down mortgages are long gone, and in most cases you will now need a minimum down payment of 10 percent plus thousands of extra dollars to cover closing costs. Paying off a 30-year mortgage is equally challenging, but it can be done. More than 20 million American homeowners have paid off their home loans and live mortgage free, real estate website reports.

Develop a Savings Plan

Determine how much money you must save. If you are paying off your home loan, your mortgage company can provide your payoff amount. Ask it to send you an amortization schedule, or pull one off of the lender's website. If you are saving to buy a home, ask a mortgage banker or real estate agent for an estimate of down payment and closing costs.

Set a target date for completion of your goal. If you want to buy a home or pay off your mortgage in one year, for example, you will need to divide the total savings amount by12 to calculate how much you must save each month.

Identify potential sources of money to save. Unless you have extra money at the end of the month, you will need to spend less on other items to free up funds to save. Prepare a budget that shows how much money you earn and spend each month. Be sure to include expenses that are not paid monthly. Many people pay their auto insurance every six months, for example.

Pay Yourself First

Paying yourself first means writing a check to yourself each month and treating that check as if it was an invoice. Wells Fargo suggests setting up a savings account and then writing a check to yourself for deposit in that account. That way, the saved money will be separate from other funds and you will be less likely to spend it impulsively.

Be consistent. Your utilities, car payment, rent and other expenses come due each month. Your payment to yourself must be just as consistent. To be successful at saving, you must pay yourself first each and every month without exception.

Measure your progress. Create a spreadsheet or wall chart that shows how you are moving closer to your goal and keep it updated. You might even post it where you can see it every morning before you go to work. The website suggests that hanging a picture of your goal, whether it is a new home or something else, on the wall as a motivator. Reward yourself in some small, non-financial way each month you meet your goal.


  • Consider setting your target savings amount as a range instead of a dollar amount. Be flexible. Save more when you can to compensate for unexpected expenses that may arise later. Have fun. Saving money is a worthwhile goal that will ultimately make your life better.


  • Avoid becoming over emotional about goals, both when you meet them and fail to do so.